SEGARRA MIRANDA v. DE JESUS GONZALEZ et al

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
IN THE UNITED STATES BANKRUPTCY COURT FOR
THE DISTRICT OF PUERTO RICO
IN RE:
JOSE DE JESUS GONZALEZ
NITXA GARCIA REYES
CASE NO. 02-05485 BKT
CHAPTER 7
Debtor(s) 	ADVERSARY NO. 09-150
WILFREDO SEGARRA MIRANDA
Plaintiff
JOSE DE JESUS GONZALEZ, et als. 	FILED & ENTERED ON 06/24/2010
Defendant(s)
OPINION AND ORDER
Before the Court are the following motions filed by Defendants SE Berrios & Longo,
Fernando Longo Quinones and Sitka Enterprises, Inc. (“Defendants”): the Motion to Dismiss For
Lack of Subject Matter Jurisdiction, [Dkt. No.12], the Memorandum of Law in support thereof, [Dkt.
No. 12-1], the Motion Objecting to Any Action by the Bankruptcy Court Except Dismissal for Lack
of Jurisdiction [Dkt. No. 57], and the Supplemental Memorandum of Law in Support of Motion to
Dismiss for Lack of Jurisdiction, [Dkt. No. 62]. These motions were joined by co-defendant
Westernbank, [Dkt. No. 24 & 68] and co-defendants Jose De Jesus Rodriguez, Cristina Newcom and
Evelyn De Jesus [Dkt. No. 65] (“Co-Defendants”). The Court also considers Plaintiff’s oppositions,
[Dkt. No. 25, 29 & 74]. For the reasons stated herein, Defendants’ motions and co-defendants
motions in support of dismissal for lack of jurisdiction are hereby DENIED.
I. 	BACKGROUND:
This adversary proceeding is before the Court upon actions or omissions that allegedly
occurred during the pendency of bankruptcy case number 02-5485. The appointed Chapter 7 Trustee,
Case:09-00150-BKT Doc#:84 Filed:06/24/10 Entered:06/24/10 17:48:56 Desc: Main
Document Page 1 of 6

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
through counsel, filed the captioned case on August 11, 2009. Shortly thereafter, Defendants filed a
motion to dismiss alleging lack of jurisdiction due to violations of Defendants’ overall constitutional
rights.
II. 	DISMISSAL FOR LACK OF JURISDICTION:
Before considering the merits of this case, it is axiomatic that the Court must first examine
the basis for its jurisdiction. The bankruptcy jurisdiction of district courts and bankruptcy courts is
conferred by 28 U.S.C. § 1334. Section 1334(a) provides for exclusive jurisdiction “of all cases
under Title 11.” 28 U.S.C. § 1334(a). Under Section 1334(b), the district courts have original, but
not exclusive, jurisdiction “of all proceedings arising under Title 11, or arising in or related to cases
under Title 11.” Id. § 1334(b). The district court then delegates these cases by virtue of 28 U.S.C. §
157(a). Section 157(a) is one of the provisions by which Congress sought to avoid the constitutional
infirmities of superseded 28 U.S.C. § 1471 announced in Northern Pipeline Construction Co. v.
Marathon Pipe Line Co. 1, 458 U.S. 50 (1982). Section 157(a) leaves it up to the district courts to
refer or not to refer cases and proceedings; each district court has provided by rule for automatic
reference to bankruptcy judges. Collier on Bankruptcy ¶ 3.02 (Alan N. Resnick & Henry J. Sommers
eds., 16 th ed.) In this District, General Order of referral of Title 11 Proceedings to the United States
Bankruptcy Court for the District of Puerto Rico dated July 19, 1984 (Torruella, C.J.), delegates
these powers to this District’s bankruptcy judges.
The bankruptcy court then is called to examine the nature of the proceedings and its relation
to the provisions of Title 11. The power to "hear and determine all cases under Title 11" is a
convenient way of saying that the umbrella is handed over by the district court to the bankruptcy
court and that, subject to certain exceptions discussed below, all proceedings that arise during the
Case:09-00150-BKT Doc#:84 Filed:06/24/10 Entered:06/24/10 17:48:56 Desc: Main
Document Page 2 of 6

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
case are to take place before the bankruptcy court. Collier on Bankruptcy ¶ 3.02 (Alan N. Resnick &
Henry J. Sommers eds., 16th ed.) Core proceedings are, at most, those that arise in Title 11 cases or
arise under Title 11. The bankruptcy judge may constitutionally enter dispositive orders in core
proceedings. Id.
Section 157(b)(2) sets forth a non exhaustive list of matters considered as core proceedings.
Plaintiffs allege that this complaint is a core proceeding because it pertains to matters concerning the
administration of the estate and because this proceeding affects the liquidation of the assets of the
estate. We agree. The relief sought in the complaint directly relates to sections 362, 544, 548 and 549
of the Bankruptcy Code. Accordingly, the allegations made in the complaint have a direct impact on
the Chapter 7 bankruptcy estate.
The Court hereby determines that this Court has jurisdiction over the subject matter and the
parties pursuant to 28 U.S.C. §§1334 and 157(a) and the General Order of referral of Title 11
Proceedings to the United States Bankruptcy Court for the District of Puerto Rico dated July 19,
1984 (Torruella, C.J.). This is a core proceeding in accordance with 28 U.S.C. §157(b).
III. 	TRUSTEE’S STANDING:
In their motion to dismiss, Defendants argue lack of due process because “[t]he Bankruptcy
Court is being asked to be a party to the case it is requested to decide. The case as presented places
the Court into being judge to the case in which it is a party, the real party in interest and beneficiary
of the judgment pursued…” [Dkt. No. 12, Page 3] Defendants confuse the role of the Trustee in
bankruptcy proceedings with that of a bankruptcy judge.
Under 11 U.S.C. § 323(a) the trustee is appointed to serve as the representative of the estate.
The United States Supreme Court confirmed this interpretation by asserting that “the trustee is the
Case:09-00150-BKT Doc#:84 Filed:06/24/10 Entered:06/24/10 17:48:56 Desc: Main
Document Page 3 of 6

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
representative of the debtor’s estate, not an arm of the government.” 	California State Bd. of
Equalization v. Sierra Summit, Inc., 490 U.S. 844, 845 (1989) (noting bankruptcy trustee is not so
closely connected to Federal Government that it cannot be viewed as separate entity) (emphasis
added). Circuit decisions further reinforce the position that a trustee does not act on behalf of the
judge or the court, but in the interests of the litigants in the bankruptcy proceeding. See In re WHET,
Inc., 750 F.2d 149 (1st Cir. 1984) (maintaining trustee owes fiduciary duty to protect interests of
debtors and creditors).
Defendants argue that their rights to due process and equal protection of the law have been
violated since the trustee represents the interest of the Bankruptcy Court, thereby preventing the
presence of an impartial court. Defendants’ argument is without merit because it directly challenges
well settled law that a bankruptcy trustee does not act on behalf of the Court; the Trustee acts on
behalf of the estate. Sierra Summit, 490 U.S. at 844-45.
Defendants then argue the Trustee’s lack of standing. It is well established by the Supreme
Court that the doctrine of standing – necessary for a plaintiff seeking resolution of a dispute through
judicial process – requires all of the following: (1) the plaintiff must have suffered an injury in fact;
(2) there must be a causal connection between the injury and the conduct complained of; and (3) it
must be likely that the injury will be redressed by a favorable decision. 	Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61 (1992) (citing Allen v. Wright, 468 U.S. 737, 751 (1984)). See
generally Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41-43 (1976). Accordingly, in
bankruptcy proceedings it is recognized that the same guidelines for standing preside over the role of
a trustee, who has the capacity to bring suit as a representative of the estate. 11 U.S.C. § 323. See
also In re El San Juan Hotel Corp., 841 F.2d 6, 9 (1st Cir. 1988) (holding trustee has authority to sue
Case:09-00150-BKT Doc#:84 Filed:06/24/10 Entered:06/24/10 17:48:56 Desc: Main
Document Page 4 of 6

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
on behalf of estate under 11 U.S.C. § 323(b)); In re Gunartt, 355 Fed. Appx. 66, 68 (7th Cir. 2009)
(stating trustee had exclusive standing to litigate claims after all debtor’s property and claims against
creditor bank became part of estate upon bankruptcy filing). In accordance with the aforementioned,
the Court hereby determines that the Trustee has met all three elements of standing to pursue the
causes of action on behalf of the bankruptcy estate.
IV. 	CONCLUSION:
Defendants’ motions make several additional arguments for dismissal such as statute of
limitations, the equitable tolling and the types of damages prayed for, to name a few. However,
because these additional allegations and affirmative defenses are fact driven, this Court concludes
that the allegations should more appropriately be considered after the conclusion of discovery, but
prior to the commencement of trial.
Having determined that this Court has jurisdiction and that the Trustee has standing to pursue
this complaint on behalf of the estate, this Court hereby denies Defendants’ Motion to Dismiss For
Lack of Subject Matter Jurisdiction [Dkt. No.12], the Memorandum of Law in support thereof, [Dkt.
No. 12-1], the Motion Objecting to Any Action by the Bankruptcy Court Except Dismissal for Lack
of Jurisdiction [Dkt. No. 57] and the Supplemental Memorandum of Law in Support of Motion to
Dismiss for Lack of Jurisdiction, [Dkt. No. 62] and the joining motions filed by the Co-Defendants
[Dkt. No. 24, 65 & 68].
It is further ordered, that Defendants are granted 30 days from the entry of this order to
answer the amended complaint. That the Court schedules an evidentiary hearing for Plaintiff’s
Motion to Secure Effectiveness of Judgment [Dkt. No. 3] together with Defendants demand for Trial
by Jury [Dkt. No. 10] and Plaintiff’s Opposition [Dkt. No. 18]. A separate Pre-Trial Order will be
Case:09-00150-BKT Doc#:84 Filed:06/24/10 Entered:06/24/10 17:48:56 Desc: Main
Document Page 5 of 6

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
entered. Moreover, parties are afforded 90 days to conduct discovery and a Pre-Trial Hearing will be
scheduled upon expiration of the term.
SO ORDERED.
San Juan, Puerto Rico, this 24 day of June, 2010.
Brian K. Tester
U.S. Bankruptcy Judge
Case:09-00150-BKT Doc#:84 Filed:06/24/10 Entered:06/24/10 17:48:56 Desc: Main
Document Page 6 of 6